Startups: Europe needs to up its game

Stefano Quintarelli, founder of the first Italian unicorn (a private startup valued at least one billion dollars), is part of the controversy involving Camillo Venesio, Vice President of the ABI, and the MEP Irene Tinagli, former president of the ECON commission of the EU Parliament, denouncing the lack of support for startups compared to what happens overseas.

His speech comes just a few days after the government published the competition decree, which was expected to include significant measures to support innovation in Italy. According to observers from the world of Italian innovation, the decree has greatly disappointed expectations: Italy is relegated in terms of legislation to one of the last positions in Europe, which already does not shine in comparison with the USA.

After a parliamentary season and seven years at the head of the Agency for Digital Italy, the founder of the first Italian unicorn, is today involved in the Rialto Venture Capital fund which, according to a strong imprinting of Silicon Valley, intervenes at an operational level in the portfolio companies with a team linked to the Italian diaspora. Rialto was born with capitals from the Silicon Valley with the mission of reconnecting Italian entrepreneurs abroad with their country of origin and is financed by the Italian entrepreneurial elite.

On the decree, Francesco Cerruti, general director of Italian Tech Alliance, one of the associations that participated in the discussions with the ministry together with InnovUp (companies, incubators, and science parks) and Aifi (private equity and venture capital) joked :

"We are sincerely surprised and disappointed by the limited ambition. We understood from the discussions that there was a strong political will to pay attention to our sector, as happened in France with a liberal government, in Spain with the socialists, or in the United United with a conservative government. Evidently, we didn’t understand very well."

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Abysmal differences in support for Startups between the EU and the USA

But let’s go back to Quintarelli’s position. The entrepreneur reviewed the disheartening differences between the EU and the USA in support of startups, which represent the main vehicle for creating new jobs and combating the youth exodus.

According to Quintarelli, the measures adopted in Europe to support startups are laughable compared to those in the United States. In Europe, tax incentives are limited and financing programs are fragmented, creating an environment less conducive to the growth of young technology companies. Furthermore, the European venture capital market is significantly smaller than the US one, with venture capital of around 72 billion euros compared to 1300 billion dollars in the US. Support for startups in Italy is a rounding error of what happens in the USA.

In the United States, support for startups is much more robust and structured. American policies include tax incentives such as the Qualified Small Business Stock, which excludes up to 100% of the capital gain deriving from the sale of shares in small companies held for at least five years. Furthermore, public spending, particularly military spending, is partially oriented towards startups and small businesses, reducing risk for investors and fueling a virtuous circle of investment and growth.

venture capital in the US is supported by enormous amounts of capital and by regulation that facilitates access to pension funds and insurance. This creates an ecosystem in which startups can thrive, effectively counteracting the youth exodus and creating new job opportunities. In Europe, however, the lack of a single capital market and regulatory fragmentation are significant obstacles that limit the growth of startups, which are often forced to seek funding overseas.

Multiply the venture capital investments of pension funds by 20

Quintarelli is, therefore, particularly critical of current European policies for the support of startups, which he considers inadequate compared to US ones. The manager highlights how the measures adopted by the EU are fragmented and insufficient to provide the necessary support to young technological companies. According to Quintarelli, Europe lacks a single capital market, which significantly limits the ability of startups to grow and compete globally.

Quintarelli proposes that Europe adopt more ambitious and coordinated policies to support innovation. It suggests a significant increase in venture capital investments, in particular by pension funds, which could allocate part of their resources to riskier but potentially very profitable investments in startups. It believes that these measures can create a more favorable environment for the growth of young businesses while reducing the emigration of young talent to more promising markets.

Original article published on Money.it Italy 2024-08-07 14:58:47. Original title: Polemiche startup, in Europa bisogna fare di più